2Wire Touts Customer Service

While others outsource, 2Wire expands its help desk, profiting by picking up calls for its partners and gaining feedback to improve its home network gateways.

Most IT firms view customer service as a necessary, but expensive, part of doing business and are happy to outsource. Not 2Wire.

Three years ago, the company had five representatives working out of its San Jose, Calif., headquarters handling calls from consumers about its broadband gateways (which at the time were sold through retailers).

Now, as the home networking market heats up, it has more than 100 help desk staffers in a dedicated call center in Arizona, fielding questions about its product as well as general inquiries about home networking for its service provider partners -- SBC, Verizon and British Telecom.

"It's been a huge advantage for us," said Jaime Fink, director of product marketing. "Not only is it profitable, but we get more information about our product."

Yes, profitable. It's hard to calculate exactly how much the company makes off service since its packaged as part of contracts with the providers (each have varying degrees of support levels). It's a modest amount, Fink acknowledges.

"Our interest here is to sell more product and raise the level of interest in home networks," Fink said. "It's not our (core) business."

2Wire's core business still has a lot of potential, analysts said. While 20 percent of all homes in the United States have more than one PC, nearly 60 percent of homes that have DSL or cable service have multiple PCs, according to the Yankee Group.

The statistic suggests that more households will look to share their broadband Internet access with multiple PCs, as well as interconnect printers and other peripherals.

2Wire was founded in 1998 by Brian L. Hinman, a co-founder of leading technology companies PictureTel Corporation and Polycom. It's privately held and venture-backed, having raised nearly $200 million from Oak Investments Partners, Venrock Associates and others.

The most recent financing, $27.5 million in December, will boost manufacturing capacity. Rather than assemble pre-made components, 2Wire recently moved to design its own system-on-a-chip and using feedback to enhance the product and make it easier to set up and use. Weekly meetings between customer service and design teams help engineers make improvements.

2Wire is optimistic about its future. Fink believes that the company will be well-positioned for an IPO if the market rebounds. Also, Cisco's $500 million acquisition of Linksys may prompt other large networking plays to look to buy firms in the field.

"Certainly, the companies that consider themselves competitors with Cisco will probably be looking (at adding home networking technology)," Fink said. "It all comes down to valuation."

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